MEDDLING European bureaucrats are threatening to kill off Britain’s final salary pension schemes.

They want to impose tough financial rules on them that would cost up to £600billion.

But few employers would be able to afford the terms and most would be forced to close the schemes, according to experts.

The so-called Solvency II rules, which would affect about 6,400 workplace schemes in Britain, are designed to bring them into line with other European countries.

But economists are warning that “one size does not fit all”. The National Association of Pension Funds says the “unbearable” financial burden could lead to the closure of every final salary – or defined benefit – scheme in Britain.

“If Solvency II rules are forced upon defined
benefit pension schemes, they would be required to hold sufficient
assets to cover the cost of buying an annuity for every scheme member at
all times.

“If this cash isn’t invested for growth then it could put back the economic recovery.

“The result will be more companies forced to close their final salary schemes or forced into insolvency.”

Pensions
Minister Steve Webb is set to warn the conference, which will be
attended by European Union officials as well as pensions experts, of the
dangers of the Solvency II guidelines.

About
2.4 million Britons currently save into gold-plated final salary pension
schemes, where a person’s retirement income is based on their final or
average salary. The pensions are largely paid for by the company.

Although employers are increasingly switching their schemes to cheaper
so-called defined contribution plans, in which payouts are based on
contributions from both employer and employee, final salary schemes
still make up a significant portion of UK pensions.

Michael Brown, of Gallagher Employee Benefits, said EU policy makers were “on a different planet”.

He said: “UK pensions are heavily regulated and rightly so.

“Solvency
II may be the last nail in the coffin for many employers with the only
solution being insolvency with a much bigger economic impact that will
certainly not help the UK’s finances.”

A European Commission spokesman said it would carry out an “impact study” before any proposal, due this autumn, was made.

Speaking
at a public hearing last month Michel Barnier, the European
commissioner responsible for internal market and services, acknowledged
the “concern” over possible regulatory changes, but he also said there
was a need for “robust rules” to protect pensioners”.

Hugh
Savill, director of Prudential Regulation at the Association of British
Insurers said: “It is irresponsible of the NAPF to say that Solvency II
will cause the closure of defined benefit pension schemes and cost
companies billions of pounds.

“It is designed
for insurance companies, which the European Commission have said that
they will not ‘copy and paste’ on to pension funds.

“It
is important that a proper impact assessment is conducted on the cost
to companies and pensioners of any new regulation and that this impact
assessment is used to inform any changes.”